The thoughts of Ludwig von Mises will not be completely absent from the American Economic Association’s annual meeting this year. Besides a session on “Buchanan and Hayek on the Constitutional Order” where he may make an appearance, Edmund Phelps of Columbia University has a paper where he begins by discussing Mises’s insight on the economic calculation problem. Phelps calls Mises “one of the early moderns” and recognizes Mises as “the founder of property-rights theory.”
The paper, entitled “Further Steps to a Theory of Innovation and Growthâ€”On the Path Begun by Knight, Hayek and PolanyÃ,” is a good exposition of the material. But, it fails miserably when one realizes that his intent is to scrap the natural language approach of the literature and replace it with a flawed mathematical analysis of interdependent relationships. This will come as no surprise, of course. Yet, his conclusion is so out of touch with reality, it all becomes too much:
“Entrepreneurship, innovation and capitalism will make it into economics classrooms only with the arrival of â€˜abstract, formal’ treatments. When those arrive, economics â€“ and capitalism â€“ will receive a huge boost.”
This statement is made even after discussing the dynamic nature of the market, the fundamental role of the entrepreneur, and the inevitability of uncertainty. It seems some people will never learn. Fortunately, the Mises Institute and hundreds of economists welcome a discussion of entrepreneurship, innovation, and capitalism that is firmly rooted in the real world. The aforementioned “huge boost” will come when “court economists” no longer feel the need to mismanage the economy and distort reality.
On the bright side: At least we’ve won the battle of ideas, and now it just boils down to presentation.